AMD Sees Q2 Revenue Slide, Says Llano Sales In Channel Are Down

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As it warned investors earlier this month, AMD reported Thursday a drop in its second-quarter revenue, citing a weak global economy and low channel sales of its Llano desktop processors.

The Sunnyvale, Calif.-based chip maker reported a net income of $37 million on a revenue of $1.41 billion, which is down 10 percent from the $1.57 billion in revenue it reported during the same quarter last year.

"Clearly, our performance in the quarter was disappointing and did not meet our commitments," said AMD CEO Rory Read during a call with investors Thursday. "When I joined AMD last year, we laid out a set of priorities to improve our execution and transform the company to sustain our long-term growth potential. This has not changed."

AMD took the biggest hit in its Computing Solutions segment, with revenue slipping 13 percent from last quarter, down to $1.05 billion. Read attributed the drop to weak sales of AMD’s Llano APUs through the channel, as OEMs continue to sit on high levels of unsold desktop inventories.

"Looking at the specifics of the desktop business … sales to OEMs increased sequentially based on their continued adoption of APUs," Read explained. "However, our desktop channel revenue declined significantly as our Llano product did not experience the same uptake it had with our OEM customers."

Last year, AMD faced manufacturing constraints with its 32-nm Llano chips, prompting it to prioritize shipments of them to its OEM customers. This backfired, however, because channel partners are now struggling to find "motherboard availability" for the Llano line, Read said, sitting on large, unsold inventories, primarily in China and Europe.

Ensuring channel sell-through for Llano is a top priority for AMD moving forward, Read continued, as well as more effectively communicating the chip’s "value proposition" to OEM customers and its channel partners.

When asked how long it would take for channel inventory levels to stabilize, Read said AMD will track these levels on a weekly basis to ensure there is progress, but didn’t offer an exact time frame.

In addition to high channel inventories, weak consumer demand for desktop and notebook PCs also hurt Llano sales.

"It is clear that the overall PC market experienced softness in the second quarter, particularly in the consumer space," Read sad.

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